Tax evasion and money laundering are the most obvious search terms related to the so-called Panama Papers. But besides the very public airing of who has been secretly shifting around large amounts of money, will there be any real legal consequences for those linked to the whole offshore account story?

Just recently Iceland’s Prime Minister, Sigmundur Gunnlausgsson stepped down while Russia’s President Vladimir Putin accepted that material in the Panama Papers implicated individuals in his inner circle.

On top of all the stepping down and justifying, top FIFA ethics committee member Juan Pedro Damiani also resigned his post after being allegedly linked to FIFA’s former vice president Eugenio Figueredo through the leaked documents. Figueredo was arrested last year after being charged with corruption by the United States Department of Justice.

But is this alleged cabal of wealthy politicians, athletes, and celebrities breaking the law?

Or are they merely cashing in on a legal loophole in the financial system?

Questions upon questions are rolling out of critical minds as the Panama Papers drama unfolds, and unfold it will for many months to come.

What are the Panama Papers?

A sign for , the Panamanian law firm and corporate service provider that has earned itself some heavy-duty media attention over the past several weeks. (Image: Valenciano/Wikipedia Commons)

The Panama Papers are basically a collective of roughly 11.5 million leaked files from the database of the world’s fourth largest offshore law firm Mossack Fonseca. With its headquarters in Panama, the firm specializes in offshore accounts.

The leaked documents reveal the identities of over 100 politicians, and in some cases their family members, who either have offshore accounts or ties to them.

Before the public

Reactions about the leaked documents and those linked to them have been mixed.

Civil servants, like politicians linked to offshore money stashing, have not been greeted well by the public. On the other hand, individuals like the star soccer player Lionel Messi who has apparently got the legal and financial backing of his Club in Barcelona, make the whole Panama Papers debate appear like an over inflated balloon waiting to burst.

Regardless of how the Panama Papers affair spins out, things might get messy for Messi. The Barcelona football star is facing charges of tax fraud “in a separate case,” which is planned to go to trial in May.

Iceland’s Premiere Minister Sigmundur Gunnlausgsson has resigned his post after much public pressure due to the leaked documents. Icelanders were less than impressed to find out that he was linked to a shell company called Wintris Inc., which apparently held millions of his dollars. Gunnlausgsson was replaced by Iceland’s fisheries minister as Iceland’s new leader.

The leak also linked British Prime Minister David Cameron to offshore money. In an interview with the media he said: “I own no shares”. He was talking about a offshore company created by his father.

Are offshore accounts legal?

Judging from the thousands of media reports about Mossack Fonseca, one might believe the Panama wealth management firm has committed financial crimes.

Some experts argue that the only scandal about the Panama Papers is that “they” might all get away with it.

Due to the offshore accounts the firm’s clients were able to evade taxation by their respective countries.

While the service rendered by offshore account management companies is not in itself illegal, the resulting consequences for the respective country’s economies are unquestionably morally unreasonable.

Feeding the gap between rich and poor

When the world’s ultra-rich don’t pay their share of tax, it only increases the tax burden on others and further intensifies social problems related to inequality. (Image: the yes man via Compfightcc2.0)

According to economist Gabriel Zucman the tax avoidance by the wealthy “worsens the global gap in wealth and income between the rich and the poor.”

Hiding large sums of money from taxation makes it more difficult for tax policies to benefit the poor while it makes it increasingly easier for “the rich to stay rich.” In general, according to Zucman, offshore accounts make it more difficult for others to get rich. The reason is, every one else has to pay higher taxes to make up for the tax money “the wealthy don’t pay when they shelter their assets overseas.”

“If we want to deal with rising inequality seriously, then we need to make these forms of tax dodging much, much more limited,” Zucman told Vox in an interview.

Zucman, in his book The Hidden Wealth of Nations,says that from 2010 to 2015 “the amount of wealth in tax havens has increased by over 25 percent” and poses a growing danger to the world economy. The stashed away wealth amounts to about $7.6 trillion, which is about 8 percent of the financial assets that households world wide own.

If there is anything beneficial to be gained from this recent offshore-account drama, it is most probably disclosure.

Popular in Corruption

Popular in Corruption

Top Authors in Corruption

Bound by a common conviction, the fates of a woman living in Beijing and a man living in New York become inextricably linked in a story of courage and freedom.

From the award-winning director of “Tibet: Beyond Fear”, Free China: The Courage to Believe, examines the widespread human rights violations in China through the remarkable and uplifting stories of Jennifer Zeng, a mother and former Communist Party member, and Dr. Charles Lee, a Chinese American businessman, who along with hundreds of thousands of peaceful citizens are imprisoned, tortured and even killed for their organs.

This timely documentary highlights the issue of unfair trade practices with the West and how Internet technologies and the re-emergence of traditional Chinese culture and spirituality are helping bring freedom to 1.3 billion people in China.

Top Authors in Corruption

About Vision Times

Vision Times tells the world everything about China in today's context. We keep a close eye on China because of its influence now and the lessons we can learn from its ancient past to better our lives today.